All projects supported by Zabala Innovation approved in the European industrial heat auction

Zabala Innovation has secured European Commission selection for all the projects it supported in the first European auction dedicated to the decarbonisation of industrial heat. The consultancy achieved a clean sweep in the call, with initiatives approved in Spain and in Portugal, under the Innovation Fund programme, which has awarded grants worth around €400 million financed by revenues from the European emissions trading market, according to the results published last week by Brussels.

“These figures once again place our consultancy in a significant position within a call that the European Commission has presented as the first EU-wide test of the future Industrial Decarbonisation Bank,” says Camino Correia, director of European Programmes at Zabala Innovation. The Innovation Fund Heat Auction aims to accelerate the replacement of natural gas and other fossil fuels in the generation of heat used by factories and production processes, one of the areas where electrification and renewable sources are progressing more slowly.

Spain leads the first auction

The auction selected 65 projects in 10 countries across the European Economic Area. Spain accounts for 24 of them, more than a third of the total, confirming the weight of Spanish industry in this first round. In this context, Zabala Innovation was involved in five proposals that passed the competitive process: four in Spain and one in Portugal. “The ratio, that 100% approval rate, reflects our ability to structure highly competitive applications, also in this new mechanism, based on criteria such as cost, maturity, implementation guarantees and emissions reduction,” says Igor Idareta, team leader and expert in European sustainability programmes at the consultancy.

The selected projects will receive funding derived from the EU Emissions Trading System (EU ETS). The use of these revenues seeks to return part of the resources generated by the carbon price to the productive sector, while linking them to investments that directly reduce fossil fuel consumption.

Fewer emissions in industrial processes

According to the data released by Brussels, the 65 initiatives will avoid more than 6.6 million tonnes of carbon dioxide over a ten-year period. During their first five years of operation, they will produce around 16.3 terawatt hours of decarbonised heat, from a combined thermal capacity of 766 megawatts. The European Commission estimates that this volume is equivalent to replacing more than 1.5 billion cubic metres of natural gas over five years, a quantity similar to the annual consumption of four million European households.

Unlike other Innovation Fund instruments, this call has focused on process heat, an essential part of industrial activity that is often left out of the public debate on the energy transition and decarbonisation. Heat is used to dry, melt, bake, sterilise or transform materials in sectors such as paper, glass, ceramics, food, textiles, pharmaceuticals and steel. Many of these applications still depend on boilers and furnaces powered by gas and other fossil fuels. As for the sectors involved, almost a third of the funding will support the decarbonisation of the paper industry and more than a fifth will go to the chemicals sector.

Technologies for different temperatures

The selected projects use a range of technological solutions. Most are based on direct or indirect resistance electric heating systems, but there are also heat pumps, solar thermal systems, electromagnetic and dielectric systems, as well as hybrid proposals. The call was open to installations of different sizes, from 3 thermal megawatts to 45, and the grants awarded range from €444,000 to €37.1 million per project.

The auction was organised into three blocks, defined by temperature and capacity. Five projects have been invited under the high-temperature category, with €62.1 million in support. A further 44 correspond to medium-temperature heat with more than 5 megawatts of capacity, the segment with the largest budget, at €286.5 million. The remaining 16 fall within the medium-temperature segment between 3 and 5 megawatts, with €47.9 million.

A new round in preparation

For companies, this type of support reduces part of the financial risk associated with carrying out investments that still compete with more widespread conventional technologies. In practice, the grant covers part of the cost of producing clean heat compared with the alternative based on natural gas. This approach makes it possible to compare bids and allocate resources to the proposals that promise emissions reductions at the lowest public cost.

The first heat auction received 85 applications. Brussels is now preparing a second round for this year, with an announced budget of €1 billion. In this way, “for industries that did not arrive in time for this first edition, the new timetable opens up another route in an area that is beginning to occupy its own space within European decarbonisation policy,” says Idareta. The draft general conditions have already been published and, since 22 May, a public consultation has been open to receive feedback from stakeholders until 2 July. Zabala Innovation will also attend the hybrid workshop where the results of this consultation will be discussed.